As Peter Lynch of fidelity Investments said, “You can’t see the future through a rearview mirror.” Although we learn from our past experiences and history, we must also look forward to the future for insight into how things will change. The past is our track record, not a roadmap to success. This is true for CPAs or any
other professional advisor for that matter.

As accountants and auditors, CPAs must certainly deal with their daily work and all the challenges associated with it… in the present. However, they must also have one eye towards the future, paying attention to the influencing factors that will impact the role, skill set and expectations of CPAs in the years to come. One way to do this is look at emerging trends that will impact accounting and auditing (A&A).

Mounting pressure on businesses today – from investors, analysts, regulators, capital markets, media and other stakeholders – drives demand for higher quality, more transparent information in an electronic, re-usable, interactive information format and in a realtime. No small feat to be sure. But emerging trends around the world are giving us a glimpse into how the domain of A&A will evolve… how the role of CPAs as auditors and accountants will change over time. In today’s world as described by Thomas Friedman in The World is Flat, trends don’t just happen in the U.S. or a single country, they happen globally. CPAs and their equivalents around the world are all affected, whether in Ft. Lauderdale, Berlin or Mumbai.

What are some of these trends? Here are three to think about:

1. Convergence of international financial reporting
   standards (IFRS)
2. XBRL and Re-usable Interactive Data capabilities for
   enhanced business reporting
3. The reputation risk of not being “green”

1. Convergence
Much literature has already been written about the convergence to IFRS (promulgated by the International Accounting Standards Board or IASB). The question is not when convergence will happen, but rather what you as a CPA are doing to learn more about IFRS? Where will you get your training and education about IFRS? How will your clients or employer be impacted? Visit the IASB Web site for details about IFRS and the FICPA Web site for information, updates and CPE programs as they continuously become available to you.

2. XBRL and Re-usable Interactive Data
Another emerging trend is that accounting standards such as IFRS are being built around XBRL, a global business reporting standard developed to generate re-usable, interactive data. XBRL is being developed by a global consortium and recently hosted its 17th international conference which focused on users. The CEOs, CFOs, internal and external auditors among them can use existing XBRL tools today to cost effectively integrate XBRL within their organizations or those of their clients.

The clear message of the conference was that XBRL is in action today, for public and privately held companies, for-profit and not-for-profit organizations, as well as governmental and regulatory agencies. XBRL has moved from theory to practical application, with organizations using it today to be more efficient, transparent, productive and effective. Auditors, whether internal or external, will clearly be impacted by this emerging trend. It may not have happened yet, but it will soon. The U.S. Securities and Exchange Commission (SEC) has publicly stated that that they are going to propose a rule to mandate XBRL in the near future. The best way for you to be prepared is to learn more now. FICPA has resources and CPE programs to educate you about XBRL. XBRL International Consortium also is a great information resource. For more information, visit www.xbrl.org.

3. The reputation risk of not being “green”
Perceived uncertainty about a company's “green” reputation can have a significant financial impact. For example, Kinder, Lydenberg, Domini Research & Analytics (KLD), a rating agency for sustainability, dropped Coca-Cola Company from its Broad Market Social Index in July 2006 because of concerns about Coca-Cola’s environmental practices in emerging countries. As a result, TIAA-CREF, one of the largest retirement funds in the U.S., sold more than 50 million shares of Coca-Cola based on this lower rating. Lack of a green reputation has measurable financial risk.

It’s hard to pick up a newspaper or magazine today and not read something about reputation of green companies. The investing public is increasingly directing its capital towards companies with greener initiatives underway and those who demonstrate – albeit voluntarily – their positive impact on and concern about the environment. Leading companies around the world are adding Chief Sustainability Officers (CSOs) to the C-Suite who are responsible for overseeing the company’s green reputation – in other words, they manage the sustainability efforts of the company. Regulators, executives, stock exchanges and investors are calling for sustainability standards to be developed as a way to bring consistency to performance measurement around green issues. Sustainability reporting may in fact become one of the more important processes for listed – and unlisted – companies in the very near future.

Today's environmentally-focused investors are reviewing their existing portfolios to see how green their investments are and how well companies are reporting their progress. Venture capital funds are being set up to exclusively invest in eco-friendly initiatives and start up. Private equity funds are investing in established companies with sustainable initiatives in place. The point is that organizations need to prove to their stakeholders that they are in fact sustainable and protecting the environment as they go about their business. How do they prove it? Through green audits! And sustainability standards are needed for them.

Are you aware that sustainability standards are being built around XBRL? What role will accountants and auditors play in this process? How will company performance be verified? What will a green audit look like? Clearly, accountants will be involved in this effort globally as it fits well with their core skill set of measuring performance against a standard.

One Eye Forward
Accountants and auditors often look at historical information in their daily professional work. That is the nature of the beast. But globalization (e.g., convergence), technology (e.g., XBRL) and other major factors of change (e.g., green reputation risk) are coming into play that will help CPAs evolve as their role becomes more robust in areas like sustainability reporting. One eye looking forward is critical to keep CPAs at pace with their clients and employers.

Based in New York, Colcomgroup has been counseling the accounting profession on marketing, communications and business development issues for the past 10 years.